Companies welcome common standards as Vietnam prepares CO2 rules

Coca-Cola, UOB say state policies are needed to protect environment

No matter the industry, private companies tend to resist government regulation. But this tendency is beginning to change when it comes to environmental rules.

From Coca-Cola to garment company Thanh Cong Textile, businesses operating in Vietnam are talking up the role of the state in driving policy, hoping the government will set more rules to weed out companies that profit from environmentally damaging activities.

Vietnam has introduced a variety of environmental rules, with one key policy set to take effect next year, when businesses will have to inventory their greenhouse gas emissions. Hanoi will start requiring major polluters to detail their plans to cut emissions. That could remove unfair advantages that some companies have exploited, such as relying on cheap fossil fuels instead of investing in clean tech.

Customers also want an eco-friendly corporate sector, but they are reluctant to pay for it, according to executives in Vietnam who say this is where the government must step in.

There is a business logic to this demand: Companies are wary of losing customers due to higher costs, but they will not be at a competitive disadvantage if all are required to pay similar costs to go green.

“Sustainability doesn’t come cheap,” Keppel Vietnam President Joseph Low said at a recent Forbes sustainability summit. The Singapore-based property developer aims to reduce emissions, through steps such as installing smart lighting and cooling equipment.

Executives are asking the government for two more industrial policies to foster good corporate behavior. One is tax breaks to clean up manufacturing, said Thanh Cong, a supplier to the likes of Adidas and Columbia Sportswear that has switched to organic materials and safer chemicals.

“Whatever can affect the environment, we have to control,” Chairman Tran Nhu Tung said at the summit last month. He added that clients have asked his company to go green without raising prices. “The cost is really high.”

The other policy is sustainability reporting standards, such as the emissions inventory. When businesses are subject to common standards, that improves the quality and effectiveness of the data they measure, according to UOB Vietnam Chief Sustainability Officer Jason Yang.

Coca-Cola has called for a combined approach to achieve a circular economy more generally. “The government policies [need] to be practiced, making sure we not only invest in education and infrastructure, [but] also policies,” said Vietnam Country Head Leonardo Garcia.

His industry is among six that must start tracking emissions, namely, industrial, energy, transport, construction, agriculture and waste. In August, the government published a manual on compliance, including rules on the design, management and verification of their carbon emissions.

Low said in an interview that, even without state intervention, customers increasingly demand that businesses exercise environmental responsibility. He told Nikkei Asia, “Some people say, ‘I refuse to buy a product if it doesn’t meet certain standards.'”

Vietnam’s inventory rules will apply to companies emitting at least 3,000 tonnes of carbon annually. Once there is a database, the environment ministry will assign each company a pollution quota before creating a market where companies can buy emissions credits if they exceed their quota.

“The allocation of GHG (greenhouse gas) emission quotas will help such entities prepare for the trading of carbon credits on the future domestic carbon market,” Roedl, a law firm, said in an analysis, adding, “Companies should proactively control and apply necessary measures during their operation to reduce the GHG emissions to have an advantage when joining the carbon market later.”

By Lien Hoang – Nikkei Asia – May 4, 2024